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Using an online broker to *trade* is really the only way to go. Note that trading is different than investing. As a trader, you may execute multiple transactions on a daily basis. You can't be on the phone to a traditional broker 10 times a day to place orders. And online commissions are much lower too.

The cheapest I've found is Interactive Brokers (www.interactivebrokers.com). You can trade 200 shares there for $1. I don't think you can beat that. Their commissions on options and futures are just as good. That's way better than the other big online names like Etrade, Ameritrade, or Scott. And compare this to so-called "full-service" brokers like Wachovia Securites, that charges $108 for the same service.

The downside is that you get zero hand-holding online. If you're not sure what or when to buy or sell, go with the traditional broker. But beware that even there, unless you have a large account, when you call for advice you may just get someone's voicemail and a call the next day. Caveat emptor holds as true here as everywhere else.

Also, remember that you need a fast reliable Internet connection (at least a DSL) and a fast computer to trade online. Also very important is to check your service's reliability and speed of execution. IB is great on both counts. (Disclaimer: I'm an IB customer but have no other relationship with them. I don't work there, know anyone who does, or hold their stock).

Bottom line, online brokers are great if you know what you're doing or if you're willing to do your own homework to learn. Carnac says if you can't be bothered, stick with a traditional broker.

Learn more about this author, Carnac.
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